Israeli Prime Minister Mr Ariel Sharon ousted hawkish rival Benjamin Netanyahu as foreign minister in a surprise move today after forging a rightist coalition likely to harden Israel's line against a Palestinian uprising.
Mr Silvan Shalom, a Sharon ally who has served until now as finance minister, agreed to take on the foreign ministry in the new government that the prime minister began forming after his right-wing Likud party's election victory in January.
In a move clearly engineered to undermine his longtime political rival, Mr Sharon asked Mr Netanyahu, a former premier, to become finance minister, a step down in the cabinet hierarchy.
Mr Netanyahu, who was defeated by Sharon in a bitterly fought race for the Likud leadership last year, refused the offer, Mr Sharon's office said.
But after Mr Sharon aides asked him to reconsider, he presented conditions for accepting the job, including broader control over company privatizations and the status of acting prime minister when Sharon goes abroad, media reported. It was unclear how Sharon would respond.
Mr Shalom, 44, has little foreign policy experience. He is seen as loyal to Sharon and his appointment is unlikely to bring big changes to Israel's foreign policy, foreign diplomats said.
"I don't think this will make much difference to foreign policy. Mr Sharon will strengthen his grip on foreign policy with a weaker person as foreign minister," a European diplomat said.
If Mr Netanyahu does not become finance minister, Mr Sharon was expected to turn to former Jerusalem mayor Mr Ehud Olmert to lead efforts to revive an economy battered by a global slowdown and nearly 2-1/2 years of Israeli-Palestinian violence.